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On June 24, 2015, the Special Needs Trust Fairness Act passed the Senate and is on to the House of Representatives for their approval. (Edit: as of 7/6/15, the House version of the Bill H.R.670 is tied up in committee).


The Special Needs Trust Fairness Act fixes an exceptionally frustrating drafting error in the Social Security Act of 1993 that originally allowed special needs trusts to be created. When the legislature originally drafted the 1993 Act they wrote the law such that only a parent, grandparent, guardian or a court can establish a first-party special needs trust to hold the beneficiary’s assets for the sole benefit of that disabled person. The 2015 Special Needs Trust Fairness Act is looking to correct the omission of “the individual” as someone who can establish a special needs trust in the original law.


The 2015 Act would amend Section 1917(d)(4)(A) of the Social Security Act of 1993 (42 U.S.C. 1396p(d)(4)(A)) to now say, “A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1614(a)(3)) and which is established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title.”


This allows disabled people to establish a special needs trust for their sole benefit without a parent, grandparent, guardian or court’s involvement. Keep up to date on the Special Needs Trust Fairness Act of 2015 and this exciting development in special needs planning law by following the track of the bill through the Senate at (https://www.congress.gov/bill/114th-congress/senate-bill/349) and through the House at (https://www.congress.gov/bill/114th-congress/house-bill/670).


The Law Office of David T. Siegel is licensed to create Special Needs Trust in both Pennsylvania and New Jersey, for more information about special needs planning click here. . .

Special Needs Trust Fairness Act of 2015 passes Senate

July 6, 2015 -

June 30, 2015 -

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The current unified credit allowed by the IRS, currently sits at $5.43 million for a single person or $10.86 million for a married couple. If you are over this credit amount then you pay an estate tax on the overage at a rate starting at 18%, for an overage of $1 - $10,000, and topping out at 40%, for an overage amount of $1,000,001 or more.


State Estate Taxes: There is another Estate Tax that most people don’t know about but effects the residents of 15 States and the District of Columbia. Those States impose an additional State Estate Tax on residents of those States when they pass away. Similar to the Federal Unified Credit, all of these States and the District of Columbia have an exemption or credit limit, and the amount of that exemption varies by State.


The States that currently impose State Estate Taxes are: Connecticut, Delaware, Hawaii, Illinois, Maine, Massachusetts, New Jersey, Maryland, Minnesota, New York, Oregon, Rhode Island, Tennessee, Vermont, and Washington. Pennsylvania does not impose a State Estate Tax but some of our neighboring States do, those State’s exemption limits are: $675,000 in New Jersey; $1 million in Delaware; $1 million in Maryland; and $3.125 million in New York (which will increase incrementally each year until it will be equal to the Federal exemption in 2019).


What this means to the residents of one of these States is that when they die, their total taxable estate will be calculated by the State Revenue Department on the State Return. If that taxable estate value is more than the State’s credit limit, their estate will pay the State Estate Tax on the overage. This gets more complicated if you are a resident of New York. New York residents whose total taxable estate value is more than 5% over the State exemption, will pay the New York State Estate Tax on the entire estate, not just on the overage amount!


Estate taxes whether Federal or State are paid by the estate. Both taxes are to be paid prior to any distributions being made to any beneficiary.


Inheritance Tax: An Inheritance Tax is a tax imposed on the beneficiary who inherits property or money from an estate. An Inheritance Tax is calculated based on the “relationship of the beneficiary to the decedent…” in other words; your Inheritance Tax rate is determined by your relationship to the person who died. Important to remember is that an Inheritance Tax is only imposed by the decedent’s State of residence, not by the beneficiary’s State of residence. For example, if a person dies in Florida and all their children live in Pennsylvania, those children do not pay an Inheritance Tax because the decedent was a resident of Florida which has no Inheritance Tax.


To date, only six States still impose an Inheritance Tax, they are: Pennsylvania, New Jersey, Maryland, Kentucky, Iowa, and Nebraska. Of those only two States, New Jersey and Maryland still impose both a State Estate Tax and an Inheritance Tax.


In Pennsylvania, the Inheritance Tax rates are 0% for everything passing to the surviving spouse; 4.5% on inheritances to the children, grandchildren, and parents of the decedent; 12% on inheritances to siblings of the decedent; and 15% to everyone else. In New Jersey, the Inheritance Tax rate will range between 0% to 16% based on the decedent and the beneficiary’s relationship.


Residents in the Northeastern part of the country have a greater chance that their estate could have either an Estate or Inheritance tax issue. It is important to understand the differences between the two types of taxes and what their impact will be on your estate and your loved ones when you pass away. There are ways to reduce your possible tax exposure by creating a comprehensive and cohesive estate plan with a competent estate planning attorney.


The Law Office of David T. Siegel, Esq., LLC is licensed to prepare estate plans in both Pennsylvania and New Jersey, to set up an estate planning consultation contact us here. . .

Federal Estate Taxes: When you die, the Internal Revenue Service will impose a tax on your estate in the form of the Federal Estate Tax. The Federal Estate Tax is “a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.” Your Estate consists of the fair market value of your assets on the date of your death, minus any mortgages and other debts, estate administration costs, and any property passing to a surviving spouse or qualified charity. Any gifts you made during your life are then added back into pool of assets to arrive at your taxable estate value.

In 1789, Benjamin Franklin wrote that “There are only two certainties in life… death and taxes.” It is now 2015; 225 years later and Ben’s quote still holds true. When you die in the United States today, you could have to pay taxes in the form of either an Estate Tax or an Inheritance Tax or both. It all will depend on which state you were a resident of at the time of your death. Here is a quick primer on Estate and Inheritance Taxes.


Federal Estate Taxes: When you die, the Internal Revenue Service will impose a tax on your estate in the form of the Federal Estate Tax. The Federal Estate Tax is “a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.” Your Estate consists of the fair market value of your assets on the date of your death, minus any mortgages and other debts, estate administration costs, and any property passing to a surviving spouse or qualified charity. Any gifts you made during your life are then added back into pool of assets to arrive at your taxable estate value.


The current unified credit allowed by the IRS, currently sits at $5.43 million for a single person or $10.86 million for a married couple. If you are over this credit amount then you pay an estate tax on the overage at a rate starting at 18%, for an overage of $1 - $10,000, and topping out at 40%, for an overage amount of $1,000,001 or more.

Estate Taxes and Inheritances Taxes, What are They?

June 19, 2015 -

Special Needs Trusts, What are they and How can they help you?

June 12, 2015 -

The first question I tend to ask parents of a special needs child is, “What are your plans for your child’s financial and healthcare decision making after their 18th birthday?” 99% of the time the response is, “What are you talking about? I’m their parent so I will be the decision maker after they’re 18… (long pause)… right?” Wrong.

In Pennsylvania, the law states that no matter if a person is special needs or not they reach the age of majority (adulthood) on their 18th birthday. If that child turning 18 cannot evaluate information and communicate decisions effectively in regards to their financial resources or if they cannot meet the essential requirements for their own physical health and safety, then that person is considered Incapacitated.

If your child is decreed incapacitated by a court of law, as their parent or legal guardian you have the right to petition that court to assign Guardianship over the child to you. There are two kinds of guardianships: a Guardian of the Person, who provides food, shelter and healthcare decision making; and a Guardian of the Estate, who is responsible and accountable to make all the financial decisions for the incapacitated person. A court will decide what is in the best interest of the incapacitated person and choose who the guardian(s) shall be. This process takes time and can be fairly costly, so parents are advised to begin preparing for a guardianship situation about 3-6 months prior to their special needs child’s 18th birthday.


If your child is considered to have legal capacity, then no court involvement is necessary. The person can assign their financial and/or their healthcare decision making to whomever they choose through Powers of Attorney documents. Often a child who is in this transition phase will choose their parents to be powers of attorney and there is a smooth transition upon their 18th birthday. Sometimes, the person chooses another relative, their spouse, or a professional care giver or group home the power of attorney, it all depends on that particular person's situation. Powers of attorney more efficient and cost effective for the family than a guardianship proceeding.


No matter if your special needs child needs a guardianship or powers of attorney, knowing that you can still be legally included and involved in their lives will provide you with peace of mind as you approach their 18th birthday.


The Law Office of David T. Siegel is licensed to provide Guardianship and Powers of Attorney counsel in both Pennsylvania and New Jersey

My Special Needs Child is Turning 18, Do I Need a Guardianship or Power of Attorney?

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On June 26, 2015 the United State Supreme Court issued an opinion in Obergefell v. Hodges, holding that same-sex married couples are entitled to equal protection under the laws of the United States, and that their marriages must be recognized by all states across the country.


What this means is that same-sex married couples will receive the same rights, benefits, and detriments as an opposite-sex married couple. Spouse equals spouse and married equals married. Some of the state tax and other spousal benefits that same-sex married couples will now be afforded include: marriage; divorce; adoption & child custody; separation agreements & qualified domestic relations orders; marital property; survivorship spousal death benefits; inheritance through intestacy; priority rights in guardianship; contract rights and much more. Think of what this will mean for same-sex married couples planning for Medicaid or a nursing home.


In Pennsylvania, Obergefell equates to a major inheritance tax savings for same-sex married couples. An unmarried same-sex couple would incur a 15% inheritance tax on any gift left from one partner to another, while a married same-sex couple will now incur a 0% inheritance tax on any gift left from one spouse to another. In real dollar terms, a gift of $500,000 left from one unmarried same-sex partner to another would be $75,000, while a gift the same amount left from one married same-sex spouse to another would be $0. Inheritance tax savings are just the tip of the iceberg for same-sex married couples who do proper estate planning.


It is more important than ever that same-sex married couples review their estate plans with a qualified estate planning attorney to gauge whether they are getting the most from the new rights afforded to them by Obergefell. Recognition of their marriages by the Court and states means that some of these rights and option are automatic; however, same-sex married couples should take control of their will and trust planning, and proactively plan by clearly stating their wishes in enforceable legal documents. There are more options for same-sex married couples than ever, so talk to a qualified estate planning attorney to learn more about them.


The Law Office of David T. Siegel, Esq., LLC is licensed to build estate plans for same-sex married or unmarried couples in both Pennsylvania and New Jersey. To contact us about your options, click here. . .

Estate Planning for Same-Sex Couples after Obergefell


Special Needs Trusts are documents that along with a comprehensive and integrated plan provide additional financial support to a person with a mental or physical disability. Many families utilize the special needs trust as a "quality of life fund" for a disabled or special needs loved one. There are three basic categories of special needs trusts: Self-Settled, Pooled, and Third Party trusts.The majority of the special needs trust drafted by special needs planning attorneys are the first party special needs trust and the third party special needs trusts. This blog post will focus on the features of those two types of special needs trusts.


Whether or not you decide to utilize government benefits to provide for the needs of your loved one, a special needs trust is a document that, if properly created and planned, can provide financial support and protection for the long life of a disabled or special needs person. All special needs trusts should be set up to provide the option of receiving government benefits in the future and therefore it is important to look for a simple phrase in the special needs trust which states the purpose of the trust is to “supplement” and not “supplant” any current of future government benefits the disabled person is or will be entitled to receive.


First Party Self-Settled Special Needs Trust: Self-Settled trusts are a product of a federal law [42 U.S.C. § 1396p (4)(d)(A)], and are commonly referred to either as a "First Party", "Self-Settled", “(4)(d)(A)”, or “Payback” trust. No matter what they are called, they all have the following main features, which are:


  • The trust can only be established by a parent, grandparent, guardian or court order;
  • The trust is funded only with the assets of the disabled person;
  • The beneficiary of the trust assets can only be the disabled or special needs person;
  • The trust must be set up as an inter vivos or living trust;
  • The trust must be irrevocable; and
  • When the disabled person passes away, any unused assets remaining in the trust must be used to “payback” the government for any Medicaid benefits the disabled person received during their life.


While the self-settled trust is appropriate in certain situations, it lacks the flexibility that some families are looking for and thus would not be an appropriate choice in all situations. The most common reasons that a First Party Special Needs trust would be created  would be in situations where: 1) the trust is funded with the assets of the disabled or special needs person; 2) a person receives a settlement from a personal injury claim and is currently receiving and does not wish to lose their government benefits; and 3) a disabled or special needs person is the beneficiary of an outright inheritance in their name and they are currently receiving government benefits.


Third Party Special Needs Trust: The third party special needs trust is a very useful and flexible planning tool for special needs planning attorneys to create a vehicle that allows families to contribute to the trust to provide financial security and protection for the long life of the disabled or special needs person. There are key features that distinguish a third party special needs trust from a first party special needs trust and they are:


  • The trust can beestablished by anyone other than the disabled person;
  • The trust can be funded with the assets of anyone other than the disabled person;
  • The beneficiary trust can be anyone including the disabled person, any non-disabled person, or a charity;
  • The trust can be set up as either inter vivos living trust or testamentary trust (testamentary trusts are created at the death of the donor and are usually funded with an inheritance or life insurance);
  • The trustcan be revocable or irrevocable; and
  • When the disabled person passes away, any unused assets remaining in the trust do not refund the state agency for Medicaid benefits received.


Special Needs Trusts are powerful and effective tools, if properly planned and drafted, that will provide financial support and protection for a the long life of a disabled or special needs loved one. Which special needs trust to use depends on your individual situation. Sometimes the situation demands that you use either a first party trust or a third party trust, or sometimes you have the flexibility of creating either or both a first party and a third party special needs trust.


The Law Office of David T. Siegel, Esq., LLC is licensed to create Special Needs Trusts in Pennsylvania and New Jersey. To learn more about the Special Needs Planning that we provideclick here. . .


For a guide outlining the benefits and differences of the two types of special needs trusts outlined in this blog post print out a copy of our White Paper, "Which Special Needs Plan is Right for You?" click here. . .

Pet Trusts, Caring for Your Pets When You No Longer Can.

My family recently adopted a puppy, she is 20 pounds of pure fur and puppy energy.  Although we’ve only had her a few short weeks, she is already a part of the family. Most pet owners feel the same way. Pets are part of the family and just like other family members, more and more Americans are looking for ways to care for their pets after they pass away. According to the American Veterinary Medical Association, there are 70 million pet dogs and 74 million pet cats in America. We should not leave the choice between abandonment or death for our pets, because we passed away, to our loved ones. How can you plan for the care of a beloved pet after you are no longer around, with a Pet Trust.

More and more states have seen the need for this type of trust and they have responded by passing laws that allow for Pet Trusts to be set up for the care of our beloved animals. In our area four states, Pennsylvania, New Jersey, New York, and Delaware, have all passed laws that grant pet owners the ability to set up Pet Trusts. You can choose a guardian for your pet, leave instructions for the care of that pet, and most importantly provide financial support for that pet. Pet Trusts are backed up by the law, and many pet owners can have the peace of mind that Rover or Kitty will be taken care of after they’re gone.

Pet Trusts allows a great deal of flexibility and specificity in its instructions. If your pet only likes a certain type of food, or requires daily walks in the park, or has specific veterinary needs, all these instructions can be included in the pet trust. All a pet owner needs to provide their attorney with is the name and address of the guardian of the pet physically, a trustee to manage the financial aspects of the trust, instructions for the care of the pet, and the source of the finances to fill out the trust. The money in the trust will then be used to care for the pet’s food, bedding, toys, veterinary services, and other expenses for the life of the pet, including the pet’s burial or cremation expenses according to the pet owner’s instructions. It is not mandatory, but some pet owners include a small stipend for the person that cares for the animal.

With a pet trust in place, should the pet owner be incapacitated and is not able to take care of the pet themselves for a short time or if they should pass away the pets will be taken care of for the remainder of their lives. Pet Trusts provide precious peace of mind and a sense of security to the loving pet owner, contact your estate planning attorney to discuss the options of a Pet Trust as part of your estate plan.

The Law Office of David T. Siegel, Esq., LLC is licensed to set up Pet Trusts in Pennsylvania and New Jersey.

June 8, 2015 -

June 3, 2015 -

Estate Planning | Special Needs Planning | Elder Law

 Law Office of David T. Siegel, Esq., LLC